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The share value of travel firm Thomas Cook (LSE:TCG) rebounded 34% during morning trading after reaching an agreement with its creditors .
The Thomas Cook Group announced “a new facility that significantly improves the robustness of the Group’s financial position”. The news follows a 75% drop in share value last Tuesday after it was revealed that the firm’s net debt was close to £900m.
The agreement, involving Barclays, HSBC, RBS and UniCredit, will provide an extra £200m until the 30th April 2013, replacing a £100m short-term facility that had been announced last month. As part of the new package the firm’s creditors agreed a further “relaxation of the financial covenants under the existing facilities”. The deal increases the firm’s debts to over £1bn.
Commentating on the agreement Thomas Cook Group Chief Exectutive, Sam Wihagen, said that “I am absolutely delighted that we have reached an agreement” and praised the banks for “acting so swiftly”.
Mr Wihagen further argued that after recent difficulties the company “will go on with what we said we were going to do some time ago, we are going to strengthen our balance sheet making sure that we will be a much stronger financial company.”
The company had previously cited on-going political unrest in the Middle East and natural disasters in Asia for declining sales.
New Deal Details
The new £200m revolving credit facility is designed to respond to the the firm’s seasonal working capital patterns. The existing credit facilities comprise a £150m amortising term loan and a £850m revolving credit facility which mature in May 2014.
The Group has also agreed to a number of other additional restrictions including no new share or business acquisitions, a limit on capital expenditure and, as previously announced, a prohibition on dividends and share buy-backs.
Due to recent events the firm is to release preliminary financial results later than scheduled. The results covering the 12 months to September 2011 are expected in mid-December.
References
↑ Director of Finance Online – Thomas Cook Group: RBS, Barclays, HSBC Holdings relax financial covenants, new money extended
↑ BBC News – Thomas Cook shares bounce higher on £200m rescue deal
